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Asia: Stocks rise as US home sales surge, rate-hike bets climb

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[SYDNEY] Asian stocks rose, with the regional equities benchmark gauge rebounding from a seven-week low, after a surge in US home sales fueled speculation the world's biggest economy can withstand higher interest rates.

The MSCI Asia Pacific Index climbed 0.8 per cent to 125.95 as of 9:03 am in Tokyo after closing on Tuesday at the lowest level since April 6.

Japan's Topix index added 1.6 per cent as the yen traded at 110.15 per US dollar after falling 0.7 per cent Tuesday. A report showed US new-home sales in April surged to the highest level in more than eight years.

Odds for a Federal Reserve rate increase in June rose to 34 per cent from 4 per cent last Monday, with traders now expecting a better-than-even chance of an increase by July.

"Strong US new home sales have added credence to the Fed's claims that the US economy may be strong enough for another rate hike in June or July," said Angus Nicholson, Melbourne-based market analyst at IG Ltd.

"Japanese equities in particular are relishing the strong US dollar."

May is poised to be the worst month since January for the Asia Pacific index in what's been a wild ride for investors this year. The regional gauge began 2016 with a 14 per cent slump through a February low on concern a devaluation of the Chinese yuan would curb global growth and amid prospects for higher US borrowing costs.

It then rallied almost 20 per cent through this year's peak in April before retreating again. The measure has fallen 4.8 per cent this month through Tuesday.

Mounting conviction that the Fed will boost borrowing costs some time in the next two months propelled the greenback higher against the yen, boosting shares at Japanese exporters. Honda Motor Co added 2.1 per cent and Toyota Motor Corp increased 1.9 per cent.

Toyota said it's investing in Uber Technologies Inc as automakers race to align themselves with the fast-growing, ride-hailing industry. The companies will also work together on offering auto leases to Uber drivers.

Sony Corp surged 5.3 per cent as investors ignored a weak profit forecast, looking instead to the company's long-term prospects in entertainment and sensors needed for driverless cars. Net income will probably decline 46 per cent in the 12 months ending March 2017 due to costs for repairs after the Kyushu earthquake, the company said.

Malaysian Troubles

Traders in Malaysia will be watching moves in the ringgit as NAB strategist Julian Wee said the country's currency could weaken the fastest among its Asian peers on potential political instability in the country from the 1MDB scandal. Global probes related to the troubled Malaysian state fund have enmeshed the biggest casualty to date: a 143-year-old Swiss bank, BSI SA.

Australia's S&P/ASX 200 Index advanced 0.6 per cent and New Zealand's S&P/NZX 50 Index gained 0.4 per cent.

South Korea's Kospi index added 0.8 per cent.

Futures on Hong Kong's Hang Seng Index rose one per cent and contracts on the Hang Seng China Enterprises Index climbed 1.1 per cent.

Futures on the S&P 500 climbed 0.1 per cent after the underlying gauge added 1.4 per cent on Tuesday, the most since March 11. Investors will scrutinize comments from Fed Chair Janet Yellen later this week, as well as a the monthly government jobs report due June 3. Crude oil futures advanced a second day amid speculation US stockpiles dropped last week.

BLOOMBERG